Diesel Demand Drives Sales Increase for Indian Car Makers

By Nikhil Gulati

Getty Images

Indian car shoppers have been buying diesel vehicles before the expected introduction of new taxes.

NEW DELHI — India’s leading auto makers Thursday said they posted higher sales in February, with customers moving to buy diesel cars and SUVs before an expected increase in taxes on vehicles which run on the discounted fuel.

Demand for diesel vehicles has continued to beat the industry trend as the fuel costs much lesser than gasoline because it is subsidized by the government to control inflation.

Most, if not all, of India’s transport trucks run on diesel.

Overall demand for cars and SUVs have, however, remained sluggish in this financial year through March due to costlier loans and higher fuel prices in a slowing economy.

Suzuki Motor Corp.’s local unit said sales in February grew 6.5% to 118,949 autos from 111,645 a year earlier. This follows a 5.2% increase in January sales to 115,433 autos, the first rise in eight months.

Maruti’s local sales grew 6% to 107,653 vehicles while exports climbed 12% to 11,296 vehicles, said India’s largest car maker by sales.

Maruti shares closed up 4.64% at 1,314.55 in a Bombay Stock Exchange market down 0.95%.

Passenger vehicle sales at Tata Motors, India’s biggest auto maker by revenue, rose 9% to 34,832 units. The company sold 9,217 units of the Nano minicar, up 12% on year.

Overall sales at Mahindra grew 29% to 43,087 units. Sales of its utility vehicles and the Verito sedan increased 33% to 20,573 autos.

Toyota Kirloskar Motor India Pvt. Ltd. said February sales rose 79% to 16,659 autos from 9,308 a year earlier.

Ford Motor Co.’s India unit said sales fell to 10,424 autos from 10,726 a year earlier, while that at the local unit of General Motors Co. skidded 4% to 8,901 units.

The India unit of Hyundai Motor Co. said local sales rose 13% to 36,805 autos in February, but exports fell 22% to 15,050 autos.

“A 4%-6% additional duty will not dilute the demand for diesel cars,” Ambrish Mishra and Navin Matta, analysts with Daiwa Capital Markets India Pvt. Ltd., said in a recent report. “However, we estimate that an additional duty of 8%-10% or higher could lead to a shift of preference back to gasoline cars.”

They said passenger car makers such as Maruti may not be impacted by the additional duty due to a balanced product portfolio of diesel and gasoline powered models but utility vehicle makers such as Mahindra could see an impact in the short-term as nearly 90% of their sales are of diesel powered vehicles.

The government is due to announce its budget for the next financial year on March 16.